PSB’s ‘buy-sell swap’ cools down forward premiums

The rupee was the best performing Asian currency in May, when the RBI was mostly intervening in the spot market to arrest any sudden rise in the local currency. Speculators had increased their “sell-buy swap” bets in anticipation that the RBI would convert its spot dollars into forwards, an event that sent premiums higher. The buy-sell swap trades by banks have now reduced the probability of that.